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PRIVATE SECTOR; From Black Monday to Black Gold

CONSIDER Thomas O'Malley's career an ode to the principle of buy low, sell high.

In his life's first act, he built a fortune as a commodities trader at Philipp Brothers and then as chief of the oil trading division at Salomon Brothers.

The second act found him as an investor and then chairman and chief executive of a once-obscure oil refinery company called the Tosco Corporation. When he bought a controlling chunk of Tosco at a Black Monday bargain price in 1987, it had assets of about $300 million.

Last week, the Phillips Petroleum Company agreed to buy Tosco for $7 billion in stock, a deal that would most likely make Mr. O'Malley, 59, the largest individual shareholder of Phillips, with more than two million shares. Other Tosco shareholders are happy, too. The $46.60 a share that Phillips will pay represents a 35 percent premium on Tosco's price before the deal was announced and a windfall away from the range of $3 to $4 when Mr. O'Malley took over at Tosco.

Petroleum industry analysts and acquaintances of Mr. O'Malley say his instincts as a trader help to explain Tosco's success. The company's growth is intertwined with his transformation from trader to chief executive. In a telephone interview last week, he said those instincts were forged at Philipp Brothers, the commodities trader, where he got a job in the mail room through the pull of an uncle who worked there. (''I was mishpocheh,'' he said, using Yiddish for family. ''It was the only way you got hired at the time.'')

The lessons there, he said, were: ''Do everything right. Make no mistakes. Pay attention to cost, cost, cost. Constantly review the commercial viability of something. See if you could buy something cheaper, and sell it for more.''

What he did, many analysts say, was to bring a trader's view to the refining business. ''He basically created the independent refining industry as it stands today,'' said Scott Smith, senior energy analyst at Dresdner Kleinwort Wasserstein.

Before Tosco grew big, most refining was done by the major oil companies or small independent refiners. When Mr. O'Malley bought into Tosco, then the Oil Shale Corporation, it produced 160,000 barrels of petroleum products a day. Now its output is 1.35 million barrels and Tosco, based in Old Greenwich, Conn., is the nation's largest independent refiner.

Mr. O'Malley acquired refineries from majors eager to sell them. He wrung out more profits by cutting costs and increasing productivity. He also angered many workers, who accused Tosco of compromising safety and threatening to close plants to intimidate unions.

Mr. Smith said Mr. O'Malley's oil-trader background served shareholders in another way: he viewed refineries as assets. ''He's not an empire builder,'' Mr. Smith said. ''He's not in love with a portfolio. He's willing to turn it over.''

Mr. O'Malley was raised on Staten Island, born to a customs inspector and a nurse. ''I did not grow up with a silver spoon in my mouth,'' he said. ''I grew up with a stickball bat in my hand.''

He put himself through Manhattan College by driving a taxi on weekends and a school bus for the Riverdale Country Day School on weekdays. ''I drove the rich kids for four years,'' he said.

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After the merger of Salomon and Philipp Brothers, Mr. O'Malley was put in charge of the company's oil refining and trading division (replacing Marc Rich, the fugitive financier pardoned during Bill Clinton's last days as president.)

In 1985, Mr. O'Malley became Salomon's highest-paid employee, earning more than $4.5 million. He left soon after. In 1987, he and some former colleagues bought 25 percent of Tosco. Mr. O'Malley assumed the management himself and learned quickly. There he acquired descriptions like tough, shrewd, blunt, single-minded. Even critics, however, praise his attitude.

''He's not afraid of public discussion,'' said Robert Wages, executive vice president of the Paper, Allied-Industrial, Chemical and Energy Workers International Union, which represents refinery workers. ''He's probably the most straightforward C.E.O. I've ever met. I don't like everything he does, but he doesn't pull punches.''

Mr. O'Malley's toughness -- what some call ruthlessness -- served him well in the refinery business, where profit margins are thin, taxes high and environmental scrutiny intense.

When Tosco bought Unocal's refining and marketing business in 1997, Tosco officials declined to even visit a Unocal management office complex, Mr. Smith said. ''It's a box full of expensive people,'' he added, describing the Tosco attitude. The employees there were dismissed.

Mr. Wages said Mr. O'Malley bullied unions to wrest concessions. He cited the case of a refinery in Trainer, Pa., where, he said, Mr. O'Malley bought the assets and forced concessions from employees on work rules, benefits and staff levels ''under a threat of losing their jobs.''

That sort of accusation is ''complete nonsense,'' Mr. O'Malley said. The Trainer plant was losing money, he said, had no other buyer and needed changes to become profitable. ''Instead of having a closed-down industrial hulk sitting there, we have a refinery that operates with union workers and pays good wages,'' he added. ''Playing hardball is not going to make everybody happy, and sometimes you just have to.''

Tosco's worst moment came in February 1999, with an accident at the refinery in Avon, Calif., that killed four workers and injured one. As a result, Tosco paid criminal fines and made donations that totaled $2 million. State regulators imposed an additional $810,000 for safety violations, an amount the company has contested.

In an unusual step for a chief executive, Mr. O'Malley appeared at a public meeting near the refinery shortly after the accident. ''I went out there and apologized and accepted responsibility,'' he said, rejecting suggestions that Tosco has safety problems. ''It was the most difficult experience in my life and one that I absolutely will never forget.'' Tosco sold the refinery last year.

Mr. O'Malley will run Phillips's refining, marketing and transportation division as a vice chairman. But it is unclear how long he will serve as a No. 2. He asserted that he would have no trouble answering to the Phillips chairman, James J. Mulva, who is as mild-mannered as Mr. O'Malley is outspoken. But he also declared an interest in other things, mainly philanthropy. ''I'm an opera fan,'' he said. ''There's always a third act.''

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A version of this article appears in print on February 11, 2001, on Page 3003002 of the National edition with the headline: PRIVATE SECTOR; From Black Monday to Black Gold. Order Reprints|Today's Paper|Subscribe